Findings

Representative

August 11, 2017

Abstract:This article provides a theoretical and empirical analysis of how politicians allocate their time across issues. When voters are uncertain about an incumbent's preferences, there is a pervasive incentive to "posture" by spending too much time on divisive issues (which are more informative about a politician's preferences) at the expense of time spent on common-values issues (which provide greater benefit to voters). Higher transparency over the politicians' choices can exacerbate the distortions. These theoretical results motivate an empirical study of how Members of the US Congress allocate time across issues in their floor speeches. We find that US senators spend more time on divisive issues when they are up for election, consistent with electorally induced posturing. In addition, we find that US house members spend more time on divisive issues in response to higher news transparency.

Abstract:Unlike previous analyses that evaluate the influence of the authorization committees on government agency management, we examine the US congressional appropriation subcommittees to see how their structural characteristics affect the performance of the programs that they fund. Specifically, we look at whether the competition for resources and member workload within subcommittees affects the effectiveness and efficiency of the programs under their purview. As part of the Congressional budget process, appropriation subcommittees are annually allocated new budgets from which they must fund a set of government programs. We find that the level of resources in a subcommittee affects program performance. Greater subcommittee resources are negatively correlated with program performance. We also find that workload matters - programs in subcommittees with fewer issue areas and programs per member are more effective and efficient. A subcommittee's capacity to focus on management problems and issue areas leads to better program performance.

Abstract:Although signing statements have been touted as a powerful addition to the president's toolkit, their use has dropped off considerably in recent years. We argue that this decrease can be explained by the changing costs of using signing statements. In particular, we posit that Congress' response to signing statements, which included committee hearings on the use of signing statements, raised the costs of this tool above any potential benefits. Investigating over 650 presidential signing statements among over 1,800 public laws, we find that public and congressional outcry influenced the issuance of signing statements and helps explain their decreased use.

Abstract:We offer a theory of strategic party disloyalty to explain roll call voting in the US House. Our theory suggests that ideologically extreme legislators become markedly less loyal to their party when it controls the majority. They stake out positions that align with the views of their extreme constituents when policy is likely to move in their direction. In contrast, ideological moderates become noticeably more loyal when they transition to the majority. Examining 35 years of ideal point estimates and measures of party unity on roll calls, we find clear evidence that member strategy, ideology, and legislative agenda setting interact to structure the frequency of defections. Further, we find evidence that defection and ideology interact to influence subsequent electoral outcomes.

Abstract:Developing a lobbying model of repeated agency, we explain previously unexplained features of the real-world lobbying industry. Lobbying is divided between direct representation by special interests to policymakers, and indirect representation where special interests employ professional intermediaries called commercial lobbyists to lobby policymakers on their behalf. Our analytical structure allows us to explain several trends in lobbying. For example, using the observation that in the United States over the last 20 years, policymakers have spent an increasing amount of their time fundraising as opposed to legislating, we are able to explain why the share of commercial lobbyist activity in total lobbying has risen dramatically and now constitutes over 60% of the total. The key scarce resource in our analysis is policymakers' time. Policymakers allocate this resource via implicit repeated agency contracts that are used to incent special interests and commercial lobbyists to provide a mix of financial contributions and information on policy proposals. These implicit agency contracts solve both an information problem in the presence of unverifiable policy information and a contracting problem in the absence of legal enforcement. These repeated relationships, that are often described using the pejorative term "cronyism" in the popular press, may in certain circumstances be welfare improving.

Abstract:This paper tests whether the political connections of banks were important in explaining participation in the Federal Reserve's emergency lending programs during the recent financial crisis. Our multivariate tests show that banks that were politically connected - either through lobbying efforts or employment of politically connected individuals - were substantially more likely to participate in the Federal Reserve's emergency loan programs. In economic terms, participation in these programs was 28-36% more likely for banks that were politically connected than for banks that were not politically connected. In our final set of tests, we attempt to identify a proper explanation for this peculiar relationship. While a broad literature speaks of the moral hazard associated with receiving bailouts, we test whether another type of moral hazard exists in the period preceding the bailout. In particular, we argue that, to the extent that political connections act as synthetic insurance, banks may have engaged in more risky behavior that lead them to the Fed's emergency lending facilities. Tests seem to confirm this explanation.

Abstract:Extant literature demonstrates that holding public office is financially lucrative. Yet little is known about which sitting legislators profit from office. Relying on original data of members of the Florida legislature, I estimate predictors of income growth among sitting legislators. I find that legislators whose vote share increases by 10 percentage points between elections report income growth of nearly $20,000. This finding is robust to estimation technique and model specification, indicating that electoral safety is tied to income growth. Lawmakers appointed to legislative posts with agenda-setting power do not obtain additional income. These data demonstrate the market values of electorally dominant legislators.

Abstract:In the $3.7 trillion U.S. state-and-local-government-bond market, greater issuance costs (lower issue-prices and greater underwriting fees) benefit financial institutions, while costing taxpayers. Campaign contributions by politically supportive underwriters can be associated with lower issuance costs. Alternatively, contributions can influence a politician to accept greater costs. This paper's evidence suggests that contributions influence politicians: In the absence of an underwriter auction, underpricing increases with the chosen underwriter's contributions relative to others. Moreover, the difference in the fees charged by contributing underwriters and those charged by non-contributing underwriters is 2.9%. In the presence of an underwriter auction, these results are statistically insignificant.

Abstract:Citizens United vs. Federal Election Commission and subsequent developments created a covert channel for firms to allocate resources from corporate treasuries to political activity. Through the use of a financial market event study of an accidental disclosure of firms' contributions to a Republican non-profit organization, I examine investors' reactions to covert investment in independent political expenditures. I find that, on average, contributing firms experienced positive abnormal returns around the disclosure event and that these abnormal returns were more positive for firms in heavily regulated industries, as well as those previously making campaign contributions to candidates. However, firms that recently faced a shareholder resolution on political spending disclosure experienced negative abnormal returns, suggesting that the controversial nature of covert activity moderated investors' reactions.

Abstract:This paper examines the relation between political regime change, a new president from a new party, and propensity for CEO turnover. Our key conjecture is that some companies, especially those that are politically sensitive, will politically reposition to adapt to the new political regime, and this political repositioning will be reflected in increased CEO turnover. We find support for this hypothesis, for CEO turnover is at least 24% more likely to happen following political regime change. The economic significance of this CEO political repositioning varies by company characteristics, with repositioning greater among large cap stocks, stocks held by short term investors, and sectors that are politically sensitive. However, political repositioning decreases stock performance relative to the sector, though this effect is weakly significant. These results suggest that political regime change causes firms to reevaluate the required skills of the CEO. Collectively, we find that political repositioning is an important determinant of CEO turnover.

Abstract:Local governments face increased pressure to collaborate with one another to provide services aimed at increasing economic development. While scholars and practitioners share interest in intergovernmental collaboration, past studies have rarely questioned the role of civil society. Based on the social capital literature, a robust local civil society with high rates of volunteerism and civic engagement should facilitate local government cooperation. Using unique primary data from county governments across the United States, the authors question the degree to which local civil society influences collaborative behavior. The authors further contrast civil society's influence relative to that of private business interests. This study provides modest evidence for the role of civil society. Rather, the findings suggest that collaboration is greatest where business involvement in development is higher and public participation tends toward more "token" policies (i.e., citizen input mechanisms) rather than organized, citizen group involvement in decision making.

Abstract:This study examines the agenda-setting power of fake news and fact-checkers who fight them through a computational look at the online mediascape from 2014 to 2016. Although our study confirms that content from fake news websites is increasing, these sites do not exert excessive power. Instead, fake news has an intricately entwined relationship with online partisan media, both responding and setting its issue agenda. In 2016, partisan media appeared to be especially susceptible to the agendas of fake news, perhaps due to the election. Emerging news media are also responsive to the agendas of fake news, but to a lesser degree. Fake news coverage itself is diverging and becoming more autonomous topically. While fact-checkers are autonomous in their selection of issues to cover, they were not influential in determining the agenda of news media overall, and their influence appears to be declining, illustrating the difficulties fact-checkers face in disseminating their corrections.